AUSTRALIAN BANKERS’ ASSOCIATION INC.
David Bell Chief Executive Officer Level 3, 56 Pitt Street Sydney NSW 2000 Telephone: (02) 8298 0401 Facsimile: (02) 8298 0402
19 February 2008
Dr. Philip Lowe Assistant Governor 65 Martin Place GPO Box 3947 SYDNEY NSW 2001
Dear Philip,
Account Switching
Thank you for your letter dated 15 February 2008, requesting the Australian Bankers’ Association (ABA) provides an initial report and on-going reports regarding the implementation of the industry’s initiative to transfer direct debit and credits. This letter constitutes our initial report. The aim of the initiative is to make it more convenient for personal customers to move transaction account. The recent impetus for this initiative came from a concern that customers wanting to refinance a home loan with a new provider might incur time and hassle costs of also switching their transaction account to the new provider. The announcement of the initiative was made by the Treasurer on Saturday 9 February. The ABA also put out a media release on that day (please find attached.) Our media release outlines four key principles. The first two principles relate to services to listing and assistance with switching direct debits and credits. These initiatives will be implemented through a committee under the umbrella of Australian Payments Clearing Association (APCA.) Given its wider membership base and its role in setting payments system rules, APCA is the most appropriate body to oversee implementation of these initiatives. Indeed, APCA has undertaken work on these initiatives over some time including the release of a Discussion Paper which sought submissions from stakeholders and has a working group already established. APCA has invited the ABA (and Abacus – Australian Mutuals) to participate on the working group and we have agreed to do so.
Australian Bankers’ Association Inc. ARBN 117 262 978 (Incorporated in New South Wales). Liability of members is limited.
AUSTRALIAN BANKERS’ ASSOCIATION INC.
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As detailed in the ABA’s media release, the listing and switching initiatives will be supported in relevant industry codes. The ABA has no control over codes of conduct relating to credit unions or building societies, but the Code of Banking Practice is an obvious vehicle to give consumers confidence that they will receive listing and switching services. This Code is currently being reviewed as part of the periodic review process. On the question of timing, the ABA member banks are committed to the November 2008 timeframe. We will keep you informed on progress, but APCA’s committee has not yet met so there are no timing benchmarks yet to report. The Government’s media release also refers to “interim” arrangements. Already banks provide some services that assist switching and we are leaving interim arrangements to individual banks. The ABA does not propose to report on interim arrangements but rather focus on the full implementation date of November 2008. If you have any questions, please do not hesitate to give me a call. Yours sincerely
______________________________ David Bell
Enclosure: (1) Account Switching Media Release dated 9 February, 2008
20080219 Letter to Phil Lowe re Switching.DOC
AUSTRALIAN BANKERS’ ASSOCIATION INC.
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Positive initiatives on switching bank accounts to assist customers *******Embargoed until 1am Saturday 9 February *******
Sydney, 9 February, 2008: Banks have committed to some additional positive initiatives to assist personal bank customers wanting to switch their bank accounts to a new provider. One of the time and hassle factors in switching bank accounts is re-arranging direct debit and direct credit standing instructions. These are often negotiated between the customer and merchants, such as telephone and electricity companies. While this is a highly convenient means of paying regular bills, it can be a bit of a hassle to re-establish them when you switch transaction accounts. Banks have been working on initiatives to make switching easier for some time, and the newly-elected Federal Government has identified this as a priority issue. These new initiatives will make it easier for the customer to move their transaction accounts. The following key principles have been agreed by banks: 1. The old financial institution will provide a list 1 of the customer’s direct debit and credit arrangements over the past 13 months to the customer in order to facilitate the establishment of the arrangements for the new account; 2. The new financial institution will provide the customer with information and support to help the customer make the switch. If requested by the consumer, the new financial institution will assist in notifying the Direct Entry users of the new direct debit and direct credit arrangements and assist with closing the customer’s old bank account; 3. The service will be supported by obligations in industry codes of practice. This will include obligations in regards to timeliness and to provide information to customers on how to avoid exception fees, and to deal fairly with customers throughout the account switching process; 4. Industry has agreed that the service will be implemented by November 2008. A progress report on the implementation of the switching service will be provided to the Government on a quarterly basis. Banks will make their best endeavours to provide an interim switching service before the November implementation deadline. The Australian Bankers’ Association notes that the Government has today announced a review into mortgage exit fees and we look forward to participating in the review. For further information: Heather Wellard, ABA PR, Phone: 02 8298 0411, Mobile: 0409 830 439 ENDS
At least initially, banks are likely to take different approaches to producing a ‘list’. All approaches must, however, provide the customer with the direct debit and credit details needed to help the customer switch accounts. If specifically requested by the customer, this list must be provided on one page. 20080219 Letter to Phil Lowe re Switching.DOC
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